Many smaller investors, whether young or less wealthy, face a hidden challenge: investment suitability rules. These regulations aim to protect us but often block access to investment opportunities that deliver more substantial long-term returns. The regulatory framework goes even further, tightening these limits and restricting access even more.
💼 The current situation
If you’re starting or have a smaller portfolio, your options are limited to “safe” and conservative investments. Meanwhile, wealthier investors enjoy access to sophisticated products like private equity, hedge funds, or alternative investments. These products offer higher returns and better diversification over time.
🌱 A missed opportunity
The key factor here is time. With a long investment horizon, smaller investors can ride out market ups and downs and still see growth. Yet suitability rules rarely consider this. Instead, they prioritise current wealth or experience, leaving smaller investors with lower-return options.
📊 The long-term effect
Over the decades, this has created a growing gap. Wealthier investors use their broader access to build capital faster, while smaller investors fall further behind. The regulatory framework amplifies this divide by further restricting access, making it harder for smaller portfolios to compete.
🚀 Why change matters
Everyone deserves the chance to grow their wealth. With proper education and a focus on time horizons, smaller investors could safely access more advanced options. The potential gains for individuals and the economy are significant.
💡 A question to consider
Shouldn’t investment horizons carry more weight than wealth or experience when deciding product access? After all, time is a powerful equaliser. Let’s rethink the system to create fairer opportunities for all.
👉 What do you think?
How can we balance access and risk for smaller investors? Should time horizons play a more prominent role in suitability rules? Let’s discuss and share ideas.
Source: LinkedIn
